Question

Define hedging. Explain it's advantages and limitations.

Answer 1

Answer:

Following are the disadvantages of Hedging. Hedging involves cost that can eat up the profit. Risk and reward are often proportional to one other; thus reducing risk means reducing profits. For most short-term traders, e.g.: for a day trader, hedging is a difficult strategy to follow.

Answer 2

Answer:

Following are the disadvantages of Hedging. Hedging involves cost that can eat up the profit. Risk and reward are often proportional to one other; thus reducing risk means reducing profits. For most short-term traders, e.g.: for a day trader, hedging is a difficult strategy to follow.